Brazil: Worries about impact of steel imports on local productivity

alaceroAlacero-Santiago, Chile. August 22th, 2013. In a press release issued this week, Instituto Aço Brasil revised its outlook for 2013, because of the weak growth of the local demand. Crude steel production is expected to reach 34.5 million tons, a figure similar to 2012. Brazilian steel exports, meanwhile, would reach 8.5 million tons, down 13% versus 2012. Steel imports would reach 3.2 million tons (-14.4%).

Imports of goods with high steel content showed an increase of 17.7% between January and July 2013, which makes clear a loss of competitiveness in the domestic industry. Domestic sales are estimated at 22.8 million tons this year, 5.3% more than last year, while apparent consumption should reach 26 million tons (+3.2%).

Direct and indirect imports impacted on the steel industry and led to an operating rate at 70% capacity, when –historically- average utilization of installed capacity surpassed 85%.

The Brazilian Finance Minister, Guido Mantega, announced that the government would not renew the tax rates on imports established in 2012, a measure that will be detrimental to the steel industry in Brazil.

According to Aço Brasil, the argument that the appreciation of the dollar offsets the impact of not extending the rates is not suitable because the currencies of some major steel exporters to Brazil were also depreciated like the Real. Moreover, even when the dollar appreciation discourages imports (an argument used by the government’s economic area), it also increases the costs of the companies in the sector, as main raw materials like iron ore and coal have their prices dollarized.

While several countries are still suffering the effects of the global economic crisis and there is an oversupply of steel in the world market, the solution for Brazilian industry is in its domestic market. Its growth requires the materialization of infrastructure investments and so-called special projects, and effective measures to alleviate the costs of production of local products. A high tax burden makes Brazilian products more expensive and leaves them under unfavorable conditions to compete, concludes Aço Brasil in its press release.

About Alacero

Alacero –Latin American Steel Association- is the organization that brings together the Steel Value Chain of Latin America to promote the values of regional integration, technological innovation, corporate responsibility and social and environmental sustainability. Founded in 1959, Alacero is formed by 47 companies of 25 countries, whose production –of about 70 million annual tons- represents 95% of the steel manufactured in Latin America. Alacero is a Special Consulting Organization to the United Nations and is recognized as International Non-Government Organization by the Republic of Chile, host country of Alacero´s headquarters.